Types of Corporations
A corporation is one of the forms of business entities whose model makes it operate as a single individual under the law with a discrete authority of other owners or shareholders. The company will always act as an individual whose mandate is very distinct from other stockholders. However, the type of corporation largely depends on some factors which are usually used to classify them. These factors are as follows:
What is the sole purpose or drive of the corporation? That is, the intention of establishing the business will determine the category of the corporation.
How many shares or stocks does the company have? Corporations usually operate on a couple of shareholders who owns the modest part of the company stock. The number of this individuals determines the class of corporation.
How does the company pay its tax? All companies and any other form of business are supposed to pay tax though the methods are quite different depending on the type and nature of business. Same applies to corporations.
Is the corporation incorporated? When one corporation joins another, then they become incorporated. This process changes the business model and thus both the host company and the amalgamated company will form one big corporation.
The above parameters are used by the authority to determine which type of corporation your company belongs to. In most cases, corporations have a wide range of types though some people categorize them into two main categories. That is the famous S and G corporations. However, it is important to narrow down your way of categorizing your business in order to establish a concrete corporation. The following are types of corporations and their respective details:
Business or For-Profit Corporation
As the name suggests, this type of corporation is used to make a reasonable amount of profit. A business corporation always offer commercial based services to customers which in turn makes them profit. Remember that the sole purpose of the company is profit, therefore this category is based on the purpose of the company.
Some people do confuse between cooperatives and corporations. If you are one of them, then you should rather get the difference right away. A cooperative corporation is a type of business that is almost similar to Business Corporation only that the profit is intended for the shareholders instead of the company. It uses the cooperative model to share profit among its members. This type is categorized based on the sole purpose of the business.
This is a privately owned corporation whereby the shareholders are not members of the public. This is the most common type of corporation and constitutes a larger percentage of all corporations around the globe. The purpose of this type of corporation is usually based on private activities such as banking, mining, exploration, manufacturing etc. Remember that religious corporations and charity-based corporations are in fact private corporations.
This type of corporation is based on public ownership, that is, the shareholders are the members of public. The corporation is always managed by officials that are appointed by the government. They engage in activities that are not private rather, the government owns it and its purpose is public based activities such as education, energy etc. This corporations are always financially independent.
This is a type of corporation whereby the company holds the responsibility of paying taxes. The shareholders have no mandate of paying taxes and therefore their respective profits are not taxable. This type of corporation is a general category and may encompass other categories as well.
It is a type of corporation whereby the individual stockholders or shareholders possess the responsibility of paying taxes. The company does not pay the tax on behave of the shareholders. This category is based on how the corporation pays tax. Just as the above category, S corporations can comprise of other categories that does not belong to C corporation category.
This is a corporation that its shares and stock can be traded freely. The shareholders are usually a small group of people such as relatives. It is categorized under the number of shareholders. On the other hand, close corporation may have varying requirements depending on the laws of the country or region.
This type of corporation is also based on the number of shareholders. The shareholder on this category may be just one person owning a large number of stock or it could be another company owning larger number of stock.
In a professional corporation, the activities carried out are usually based on professional disciplines such as engineering, medicine, architect or law. This type of corporation is found almost everywhere in the world. Professional corporations are managed and owed by these professionals.
This type of corporation is based on the geographic scale under which it operates. The foreign corporation can be registered and certified by one country such as Canada for example and could operate on other countries as well such as the United Kingdom or the United States. These companies could benefit from tax breaks which is an advantage to the corporation and thus the shareholders.
In general corporation are a type of companies that are usually beneficial to both the private and general public. The nature and type of corporation may be generalized into either an S corporation or the C Corporation. You will also realize that other subcategories may fall under either of these two categories. In most situations, if a corporation does not provide any form of tax payment method, it will be categorized as a C corporation which will hold the company liable for all tax payments.
In conclusion, if you are looking to start on join a corporation to become a shareholder, you can choose from any of the above categories and start your journey to making profits. Note that the stock market is a highly volatile place and anything could happen. You can either make mega profit or end up losing everything altogether. But remember any business mind is prepared for the risks involved in business.